A new report warns that abandoning the UK Emissions Trading Scheme could lead to increased costs for industry and higher emissions, as carbon costs are shifted to international borders and other sectors.
Scrapping the UK Emissions Trading Scheme would not make carbon costs disappear; it would push them elsewhere and, according to a new Energy UK report published on 7 May, could leave British business facing as much as £10bn in additional costs through the EU’s Carbon Border Adjustment Mechanism between 2026 and 2035.
The findings come as the scheme has been drawn into political debate, with the Conservatives and Reform UK both proposing to remove it. Energy UK argues that would be a costly mistake for industry, particularly in sectors already exposed to international trade and heavy energy use, including steel, aluminium, cement, chemicals and power generation.
The UK ETS, which began on 1 January 2021 after replacing participation in the EU system, is a cap-and-trade mechanism that requires emitters to hold allowances for each tonne of carbon dioxide they release. The government says it applies to energy-intensive industry, electricity generation and aviation, with some free allocation for businesses judged to be at risk of carbon leakage.
According to Energy UK, abandoning the scheme would not shield exporters from carbon pricing pressure. Instead, it would leave them more exposed to border charges in markets that are already tightening climate rules, including the European Union and, increasingly, other major economies such as India and China.
Tom Cantillon of the Energy and Climate Intelligence Unit said that scrapping domestic carbon pricing would simply redirect costs away from the Treasury and towards Brussels. He warned that without a UK carbon price, the country’s own border mechanism would be unable to operate effectively, leaving industry more vulnerable to carbon dumping.
The report also contends that the hit would not stop at trade. By lowering the cost of running gas-fired plant, removing the ETS could encourage higher gas demand, which in turn would lift wholesale gas prices and, because gas typically sets the marginal power price, pull electricity prices higher too. Energy UK estimates the average household could pay about £74 more a year on gas, with heavier impacts for homes that rely more on heating.
The climate implications are equally significant. Energy UK says emissions could rise by as much as 25% if gas use increased after the scheme was removed. That would complicate the UK’s wider decarbonisation pathway at a time when ministers are still weighing how to balance industrial competitiveness, electricity affordability and the country’s net-zero commitments.
Adam Berman, Energy UK’s director of policy and advocacy, said abandoning carbon pricing would amount to a self-defeating move and risk pushing investment towards countries that are building their low-carbon manufacturing advantage more quickly. He also argued that carbon pricing should not be treated as a complete answer, saying government should do more to support industrial electrification and cleaner production, rather than dismantling the incentive structure altogether.
That broader context matters because the UK ETS has already played a material role in reshaping the power system. Energy UK says carbon pricing has helped make coal uneconomic, while gas’s share of the generation mix has fallen sharply over time. It also points to the rapid growth of wind and solar, arguing that the expansion of low-cost renewables has delivered substantial consumer benefits.
The Office for Budget Responsibility has previously estimated that the scheme will raise £2.6bn in 2024-25, underlining its role not just as an environmental instrument but as a source of public revenue. Government reviews have also characterised the ETS as a key part of the UK’s post-Brexit climate architecture, designed to preserve competitiveness while tightening the carbon constraint on industry.
For industrial decarbonisation professionals, the report’s central warning is clear: weakening the UK ETS would not ease the transition, but could instead raise compliance risk, increase energy costs and undermine the investment case for cleaner production.
- https://www.edie.net/report-scrapping-the-uk-ets-could-cost-businesses-10bn/ – Please view link – unable to able to access data
- https://www.gov.uk/green-taxes-and-reliefs/uk-emissions-trading-scheme – The UK Emissions Trading Scheme (UK ETS) is a cap-and-trade system that requires businesses to obtain allowances for each tonne of carbon emitted. These allowances can be purchased at auction, from traders, or obtained for free if the business is at risk of carbon leakage. The scheme covers energy-intensive industries, power generation, and aviation sectors, with annual reporting requirements for emissions and allowance surrender.
- https://www.gov.uk/government/publications/participating-in-the-uk-ets – This guidance provides an overview of the UK Emissions Trading Scheme (UK ETS), detailing its applicability and requirements for businesses. Established on 1 January 2021, the UK ETS replaced the UK’s participation in the EU ETS, aiming to enhance the UK’s climate ambition while protecting business competitiveness. The document outlines the steps for businesses to engage with the scheme and ensure compliance.
- https://www.gov.uk/government/collections/uk-emissions-trading-scheme-uk-ets-reports-and-scheme-reviews – This collection includes various reports and reviews related to the UK Emissions Trading Scheme (UK ETS). It encompasses annual reports on the scheme’s operational performance, allocation tables for free allowances, and reviews assessing the scheme’s effectiveness. The collection also features public reports from the UK ETS Registry, providing transparency on emissions and allowance data.
- https://www.gov.scot/publications/uk-emissions-trading-scheme-business-regulations-impact-assessment-bria/ – The Business and Regulatory Impact Assessment (BRIA) evaluates the potential impacts of changes to the UK Emissions Trading Scheme (ETS) on Scottish businesses. Published on 23 November 2023, the assessment covers various aspects, including the purpose and intended effect of the proposed changes, consultation processes, and potential impacts on competition and consumers.
- https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/emissions-trading-scheme-uk-ets/ – The Office for Budget Responsibility (OBR) provides an in-depth analysis of the UK Emissions Trading Scheme (UK ETS), detailing its operation, revenue generation, and economic impact. The UK ETS, implemented on 1 January 2021, is a cap-and-trade system where businesses bid for carbon allowances. In 2024-25, the OBR estimates that the UK ETS will raise £2.6 billion, representing 0.2% of all receipts and approximately £90 per household.
- https://www.gov.uk/government/publications/uk-emissions-trading-scheme-review-2023 – The UK Emissions Trading Scheme (UK ETS) review 2023, published on 18 December 2023, assesses the scheme’s performance in its initial years of operation. The review evaluates the extent to which the UK ETS is achieving its purpose, considering factors such as emissions reductions, market performance, and future development plans. It also outlines the Authority’s plans for the scheme’s future development beyond its first few years of operation.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
7
Notes:
The article references a report published on 7 May 2026. A search for this report yielded no direct matches, suggesting it may be a new release. However, without direct access to the report, it’s challenging to confirm its originality and freshness. The narrative aligns with ongoing discussions about the UK’s Emissions Trading Scheme and the Carbon Border Adjustment Mechanism, indicating that similar topics have been covered recently. This raises concerns about the novelty of the content.
Quotes check
Score:
6
Notes:
The article includes direct quotes attributed to Tom Cantillon of the Energy and Climate Intelligence Unit and Adam Berman, Energy UK’s director of policy and advocacy. A search for these quotes did not yield direct matches, suggesting they may be original. However, without access to the original report or independent verification, it’s difficult to confirm the authenticity of these quotes. The lack of verifiable sources for these quotes raises concerns about their credibility.
Source reliability
Score:
5
Notes:
The article originates from edie.net, a publication focusing on environmental and energy news. While it is a niche publication, it is known within its sector. However, the lack of direct access to the original Energy UK report and the absence of corroborating sources from major news organisations or official government publications limit the reliability of the information presented.
Plausibility check
Score:
7
Notes:
The claims about the potential costs of scrapping the UK Emissions Trading Scheme and the implications of the Carbon Border Adjustment Mechanism are plausible and align with existing policy discussions. However, without access to the original Energy UK report or independent verification, it’s challenging to assess the accuracy of the specific figures and claims presented.
Overall assessment
Verdict (FAIL, OPEN, PASS): FAIL
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The article presents claims about the potential costs of scrapping the UK Emissions Trading Scheme and the implications of the Carbon Border Adjustment Mechanism, citing a report from Energy UK. However, the lack of direct access to the original report, absence of corroborating sources from major news organisations or official government publications, and the inability to independently verify the quotes and figures presented raise significant concerns about the credibility and reliability of the information. Given these issues, the content cannot be fully verified, and publishing it carries inherent risks.
